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  1. Wealth
September 25, 2013

Honesty, however expensive, is the best policy in divorce

By Spear's

This case demonstrates a growing trend for the courts to come down hard on ‘non-disclosers’ in divorce proceedings

In a recent High Court case a London businessman, who was divorced in 2009, has been branded a ‘master of the half-truth’ and told that he may now have to pay a large capital sum to his ex-wife after a judge found that he presented a ‘deliberately false’ picture to the wife, during the process of securing a financial settlement in his divorce.

The couple (who cannot be named for legal reasons) had come to an agreement directly and with the minimum of intervention from lawyers, whereby the wife received a lump sum of £1.8 million. Three years later, the wife discovered that certain documents had not been disclosed to her by the husband during the settlement discussions. These indicated that her ex-husband had not disclosed his ownership of shares worth £740,000 in a company with a £50 million turnover which he had suggested was not trading and investments of an additional £800,000. The original settlement has now been set aside.

This case demonstrates a growing trend for the courts to come down hard on ‘non-disclosers’ in divorce proceedings. It has long been the case that there should be full and frank financial disclosure of all assets and income held worldwide, between divorcing couples who are resolving their financial settlement.

Pictured top: Rupert Murdoch and Wendi Deng will need to ‘fess up to their resources

However, while historically many husbands (or indeed wives) may have succeeded in blurring the lines as to the full extent of their wealth, it is becoming increasingly hard for this strategy to succeed.

Her Majesty’s pleasure

Earlier this year, Scot Young served three months of a six month prison sentence for contempt of court after he was found not to have engaged in the financial disclosure process. His wife had claimed that he had, at the height of his success, been worth £400 million. He in turn claimed to have lost his wealth in a failed business project, but his provision of unclear financial information and the failure to give answers to basic questions over a prolonged period of time, eventually led the court to take the drastic step of committing Mr Young to prison for failing to respect disclosure orders.

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In June of this year, a landmark judgement was handed down by the Supreme Court, ordering the transfer of seven properties to Yasmin Prest to make up part of her capital settlement, notwithstanding that the properties legally belonged not to the husband but to companies which were owned and controlled by him.

Pictured above: Roman Abramovich and his first wife, Olga

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The legal basis for the decision was the court’s finding that the husband, and not the companies, had originally provided the funds for the properties to be bought. There was no conclusive evidence of the husband providing the funds, but the court said it could draw that conclusion where the husband and the companies had been deliberately obstructive. It is expected that the case will limit future scope for company structures to be used to ring fence assets with a view defeating financial claims on divorce.

Full disclosure

The courts are therefore sending out a clear signal that honesty is the best policy and that those who seek to avoid providing full financial disclosure in their divorce, or who look to move assets out of reach, do so at the risk of facing the full force of the sanctions that are available to the court.

These cases also highlight the importance of taking legal advice. Spouses who may be in the less financially advantageous position within the marriage (and who may therefore be on the receiving end of a ‘non-discloser’), will do well to consult with a family law specialist in order to avoid falling victim to hidden assets and a reduced financial settlement, while those spouses who may be tempted to hide assets should think again on the perils that such a strategy may entail.

Ruth Abrams is a senior associate in the family team at SA Law London

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